My hometown is headed the way of Detroit. Sad day indeed.
http://finance.yahoo.com/news/chicago-faces-2-2-billion-040100080.html
http://finance.yahoo.com/news/chicago-faces-2-2-billion-040100080.html
RIP Chicago
- Thread starter mjvcaj
- Start date
Chapter 9 Bankruptcy
Can be used to reduce the pension obligations. Chicago has a lot more going for it in terms of tax base and commercial activity than Detroit and I would think bankruptcy relief from ill-advised pension obligations, and maybe also some other debts, would be a workable solution. I know bankruptcy has a stigma attached to it, but financial people should see bankruptcy as a good thing in Chicago's case. This would help the credit rating, no?
Can be used to reduce the pension obligations. Chicago has a lot more going for it in terms of tax base and commercial activity than Detroit and I would think bankruptcy relief from ill-advised pension obligations, and maybe also some other debts, would be a workable solution. I know bankruptcy has a stigma attached to it, but financial people should see bankruptcy as a good thing in Chicago's case. This would help the credit rating, no?
Why is it sad it was intentional and expected due to mismanagement and politics of the leadership.
Nothing sad about it. Chicago has assets, Detroit doesn't. This could be the first step toward breaking up the corrupt Democrat monopoly and putting city finances back together and reorganizing the debt. This should be the catalyst to improvement.
There will not be improvements so as Unions control the political structure of the City. Unions do a lot of great things and one of them is the care and maintenance of their membership. They care not about the financial results in the future just the present and the feel good accomplishments.
I don't think Chicago is going the way of Detroit in any way, shape, or form....BUT they have some MAJOR Problems to figure out. I'm disappointed as hell. I love this city. I'd be a lot more worried if Chuy Garcia was voted into office. That guy was completely clueless. Ken Griffin (Republican who thinks the wealthy's votes should count more) gave Rahm Emanuel more than $1 million in campaign contributions. I think that says a lot about whose hands conservatives want Chicago to be in.
The reason Chuy was even close in the last election is because Rahm is the only one willing to take on the Chicago Teachers' Union. That didn't sit well with a lot of people. Now Rahm is asking them to take a 7% pay cut. It will be another huge battle.
Believe it or not (mjvcaj, I know you know this) Rahm is actually fairly conservative. I felt like a complete outsider to my very liberal friends. In fact, my wife and I were the ONLY ones in our group of friends who voted for Rahm. They looked at us like we were idiots when we said we voted for him.
This city needs a strong armed mayor....that's all there is to it.
The reason Chuy was even close in the last election is because Rahm is the only one willing to take on the Chicago Teachers' Union. That didn't sit well with a lot of people. Now Rahm is asking them to take a 7% pay cut. It will be another huge battle.
Believe it or not (mjvcaj, I know you know this) Rahm is actually fairly conservative. I felt like a complete outsider to my very liberal friends. In fact, my wife and I were the ONLY ones in our group of friends who voted for Rahm. They looked at us like we were idiots when we said we voted for him.
This city needs a strong armed mayor....that's all there is to it.
I am torn about this...because people depend on those pensions to live.
There are situations, though, where things go totally awry and I'll give you an example. My mother in law divorced my father in law 39 years ago. He died suddenly of a heart attack 8 years ago. My mother in law found out that she was due his pension or a significant portion of it for the rest of her life, even though they haven't been married for almost 40 years. She retired just like that.
Don't ask me the details, because I don't know.....but that money should be going to strengthen the pension. Situations like that are nuts. The problem is a lot of these pensions were negotiated during the post WWII economic boom in America.
In any business deal it has to work for both parties. Clearly those pensions didn't work for Chicago to remain solvent. They weren't sustainable OR money that should have gone toward pensions were pilfered by the Democrat machine. I don't really feel sorry for those that could be losing money because most likely they voted for the party that offered them a deal too good to be true. The Democrats in control for decades are wholly responsible for this and will now need to own it. A whole bunch of Democrats were long on campaign promise with no plan to sustain the pensions and this is why people shouldn't blindly follow empty promises. The good news is Chicago has assets and a reorganization could get the city back to square. It's gonna hurt some people but will set the example for a lot of other municipalities.
Even though the state constitution says those benefits can't be reduced or impeded? I don't know the exact wording, but the state Supreme Court ruled that they couldn't get out of paying those benefits.
Also, the main problem that ALL politicians have is they love to spend and hate to tax. Yes, even ones that shout fiscal responsibility and/or claim to be fiscally conservative.
It'll be ok, Rauner will fix the problem. See, what you have to do is cut funding for poor people (Medicaid) and you have to cut funding for things like shelters for the homeless and battered women. You also need to let a tax expire so he can keep another 750k per year. Yes, greed is the problem. Poor and helpless people are just too greedy and they've been dragging the rich down for decades. It's about time someone stood up to them. God bless you Bruce Rauner. You are truly doing God's work.
Defined benefit pensions need to be done away with. Way too many of them are actuarily insolvent -- including the granddaddy of them all: Social Security.
Yep
Bankruptcy law takes priority. All the city needs to show that the reorganization plan will benefit all the creditors and interested parties and the judge would order it. Did you read the link I included ?
So that ruling will overrule Illinois' state constitution? This happened a couple of years ago in Detroit and a judge had ruled the bankruptcy was unlawful due to how it would effect pensions. I can't find the final ruling or whatever happened with that case.
I haven't read any of those cases, but I can say a couple of things
In Bankruptcy court, the judge holds all the trump cards. The only thing that matters concerning debts, discharge and priority is federal law, not state law. In Detroit, the judge might have disapproved the reorganization plan based upon other factors without dealing with whether pension obligations can be modified.
There might be a distinction between between past unpaid obligations and future accrued obligations.
In Bankruptcy court, the judge holds all the trump cards. The only thing that matters concerning debts, discharge and priority is federal law, not state law. In Detroit, the judge might have disapproved the reorganization plan based upon other factors without dealing with whether pension obligations can be modified.
There might be a distinction between between past unpaid obligations and future accrued obligations.
That tends to be because the expected returns are unrealistic given the risk profile pension managers take.
Why? It essentially is a huge defined benefit pension. And it suffers from the very same general problem so many DB pension plans do: it's pay-as-you-go and the ratio between dollars coming in and dollars going out continues to worsen...and will eventually render the fund insolvent.
Back in the late 70s, the local union I hire out of instituted a defined contribution pension plan. It's a secondary pension -- their primary pension is national, defined-benefit, and (like most such plans) well underwater. Today, the plan has 1,400 participants and assets north of $200 million. The average retiree is leaving with roughly $500K (and rising). Plus, the plan has absolutely no withdrawal liability for employers. And if every contributing employer went belly-up today, every penny of that $200 million would be left just where it is -- in each participant's account. There's a strong bias in the union benefit world towards DB and against DC. But they should try talking to our guys sometime -- particularly the younger ones.
Social Security is a dinosaur -- not only is it badly outdated, it's also destined for extinction. I'm all for having a program that compels putting money away today in order to provide for people in their non-working years. I am not, and never have been, opposed to the general concept of Social Security. I'm opposed to it being a dinosaur. And I think the worst possible way to fix it is by turning an already bad deal into an even worse deal.
True. Detroit's a dump. Chicago, with all its problems, is anything but a dump. Both cities are in fiscal hell, but for quite different reasons.
Here's the thing though: where is Chicago heading? Detroit hasn't always been a dump. In fact, at one time it was considered to be among the country's most vibrant cities. I don't think it makes sense to look at these things as snapshots in the present. Rather, they should be viewed on a continuum -- where were they 30 years ago...where are they likely to be 30 years from now? And I'd say Chicago is in real danger of becoming a dump in the future if it doesn't get its act together.
It was more to rile you up than anything. Obviously I hope it doesn't go the way of Detroit, given I travel back 6-7 times per year.
VanPastorMan
Hall of Famer
I love the city too. I went to college there at the Moody Bible Institute. When we lived there from 97-01 it seemed like everyday some person in the city government was being tried for some kind of corruption. I see corruption as the downfall of this great city.
